Oil Sinks on Output Complications

Vicki Perkins

Crude oil prices could weaken if the dollar rallies and stocks weaken.

While the producer group complied with a pledge to curb output and ease a glut in 2017, US flows that are gaining a bigger slice of the prized Asian market may prompt some nations to boost supplies, saidWarren Patterson, a commodities strategist at the Dutch bank.

Brent sweet crude traded at $65.70 per barrel on Monday, an increase of 21 cents or 0.3 percent from its previous close.

The rising US output comes largely on the back of onshore shale oil production.

That has undercut some of the enthusiasm for oil, as investors weigh increased USA supply against the likelihood that the Organization of the Petroleum Exporting Countries and non-Opec producers will maintain supply cuts that have been in effect for more than a year. "They continue to give market share away to the U.S".

But the analyst seems to think this might be a fait accompli, because the OPEC deal is giving "market share to the U.S." via a surge in exports to the coveted Asian market, the traditional bastion of Middle East producers - and that this will encourage some nations to retaliate by boosting supply.

Crude's rebound since previous year is encouraging American drillers to pump even as they make efforts to be disciplined on spending, Patterson said. The news is not likely to change the outlook for rising US production which is now up to 10.37 million barrels per day (bpd). Prices could trade sideways if the dollar strengthens along with stocks.

Latest US oil production data will be released on Wednesday.

Oil rose on Tuesday, after Libya said loadings of crude at a key port had been suspended, offseting an earlier dent to the price caused by evidence of the inexorable growth in United States oil output.

IraqtoppledSaudi Arabia to become India's largest crude oil supplier between April 2017 and January 2018, with Iran the third-biggest oil supplier, and Venezuela fourth, India's Oil Minister Dharmendra Pradhan said last week. The Organization of Petroleum Exporting Countries and its allies pledge to curb output may be undermined as the US ships more oil to Asia, according to ING Groep NV. Crude shipped overseas from the US will soar to nearly 4 million barrels a day by the mid-2020s, rivaling shipments from Iraq and Canada, it said last week.